The Evolving Law and Practice of Voyage Charterparties

Rhidian Thomas, Rhidian Thomas

• Publisher: Informa Law from Routledge
• Year: 2020
• ISBN:
  9781000341485
• Edition: 1
• Topic: Droit
• Subtopic: Droit maritime

This addition to the Maritime and Transport Law Library looks at voyage charterparty contracts and addresses complex legal and practical issues arising out of them and their relationship with bills of lading and international sale contracts. It offers insightful discussion on other distinctive features of voyage charterparties, such as deviation, laytime and demurrage, seaworthiness and cancellation clauses, and on the recent case law developments in jurisdiction and arbitration clauses in voyage charterparty contracts.

CHAPTER 1

The evolving flexibility of voyage charterparties

PROFESSOR D. RHIDIAN THOMAS*

INTRODUCTION

1.1 In general terms a voyage charterparty may be defined as a contract under which the owner agrees to proceed to a specified load port and there load a specified cargo made available by the charterer, and thereafter transport the cargo to and discharge it at a specified discharge port.¹ The preciseness of the concept is not affected if the cargo is to be part loaded and/or discharged at two or more specified load and/or discharge ports; nor if a named berth(s) or place(s) is specified within the ports. This approach to the nature of a voyage charterparty readily feeds support for Lord Diplock’s analysis of a voyage charterparty as a contract composed of four integral parts, namely, the preliminary voyage to the load port, the loading of the cargo, the carrying voyage to the discharge port, and the unloading of the cargo.² Only very rarely is the vessel spot-prompt, with the consequential absence of a preliminary voyage.

1.2 While this description may fit the history of the contract and much of the contemporary commercial use made of voyage charterparties, it does not represent the entire picture.³ The demands of modern-day trade may require a more flexible contract. In most instances the voyage charterparty is not a transport contract simpliciter but an integral part of an international sale contract on shipment terms.⁴ It is the means by which the party who has the transport obligation discharges that obligation. In the case of cfr and cif contracts it will be the seller, and in the case of fob and fas contracts the buyer. In these circumstances the international sale contract is dominant and the voyage charterparty servient, in the sense that the party making the fixture must ensure that the voyage charterparty is framed in terms which enables him to perform his obligations under the sale contract.⁵ The latter, for example, will doubtlessly specify a shipment period and/or a lay/can spread, and also a programme of etas, which the party with the transport obligation will seek to perform through the exercise of contractual rights under the voyage charterparty. In many instances, therefore, performance under the sale contract and voyage charter-party will run in parallel. The association between the two may be rendered yet more intimate by the incorporation or replication of charterparty terms in the sale contract.⁶

1.3 When the party with the transport obligation is also a trader, the precise and rigid category of voyage charterparty described above will not be an attractive proposition because, above all else, traders value flexibility. The source of their supply or the identity of their eventual buyer may not always be known in advance. Even when matters are initially settled and certain, they may wish to change their plans. If there is advantage in moving from one market to another, from one product to another, from one contract to another, or from one seller or buyer to another, it is in the nature of the trader’s instinct to seek to take the opportunity. These opportunities will, in part, only be available if the necessary flexibility has been built into the voyage charterparty under which the ship has been fixed. A further advantage associated with the kind of flexibility here under discussion is that it may provide the means of escaping from contractual difficulties which have arisen, such as an impending or escalating demurrage liability.⁷

1.4 The kind of flexibility which trader/charterers may seek to introduce into their charterparties will customarily relate to the ports of loading and discharge, loading and discharging places within ports, the rotation with regard to multiple ports/places, the description and quantity of the cargo to be transported and the method of loading and discharging. They may also contract for a right to load and discharge ship-to-ship, to co-mingle cargoes in the course of the voyage, and, more broadly, to regulate the navigation and performance of the vessel. These kinds of liberties and privileges are only capable of being founded on express terms or postcontract mutual consent. They do not arise by implication of law or by implication from the charterparty. In the absence of express terms or mutual consent, the owner is entitled to perform the charter according to its agreed terms, and in accordance with the broad obligations to execute the voyage with utmost despatch and not to deviate from the contractual route. A voyage charterparty has none of the innate contractual flexibility of a time charterparty.⁸

1.5 In response to the demands and, doubtlessly, the contracting power of traders, many contemporary voyage charterparty forms manifest a flexibility that distinguishes them markedly from more orthodox voyage charterparty contracts. Although advantageous to charterers, this emerging contractual flexibility adds significantly to the risks borne by owners who are left with less control over their commercial destiny. The potential difficulties are many – owners may experience delay, additional costs, be required to deviate, fail to meet a cancellation date under the existing or a subsequent charter, arrive ahead of or after a lay date, or incur third party liabilities, for example under bills of lading or other carriage of goods contracts. Without more, these risks of delay, additional costs and third party liabilities will fall on the shoulders of owners. An owner, therefore, who agrees to flexible contractual terms should be aware of the potential risks and, ideally, seek to protect himself by appropriate express terms in the charterparty.

1.6 The intention underlying this contribution is to consider the different kinds of flexible contractual provision that may be encountered in contemporary practice, with the greatest emphasis placed on the right of charterers to nominate and renominate load and discharge ports.

LOAD/DISCHARGE PORTS AND THE EXERCISE OF OPTIONS

Introduction

1.7 The voyage charterparty may designate a single or multiple ports where the cargo or part cargoes are to be loaded and discharged. But it is equally open for the charterparty to confer upon the charterer an option, which may be of a limited or extensive nature, to identify the port(s) of loading and discharge at a time after the contract has been entered into. Many variations are possible, of which the following are examples:

(i) a limited option to load at one or both of two named ports and to discharge at one or both of two named ports – load at “A and/or B” and discharge at “C and/or D”;

(ii) a more extensive option to load and discharge at any one or more of a range of ports identified by name – load Antwerp/Rotterdam/Hamburg discharge Cape Town/Port Elizabeth/Durban;

(iii) a more extensive option still to load and discharge at any one or more ports falling within a geographic range – load any one or more ports US Atlantic seaboard and discharge any one or more ports River Plate.

1.8 The nature and extent of a designated range is a matter of contract. Customarily there will be a recognisable geographical or regional association between the ports in a range, however defined. As a matter of principle the charterer could be given the right to nominate any load/discharge port world-wide, although this possibility is unrealistic. Nonetheless, the contractual range may be extensive, as is illustrated by the special provision in the Asbatankvoy contract considered in The Jasmine B⁹ which provided with regard to the discharging ports:

“Discharging port(s): One or two safe port(s), United Kingdom, Eire, Continent, Gibraltar/Hamburg range, Sardinia including Denmark … or

Charterers’ option one or two safe port(s) European Mediterranean not east of but including Greece … or

Charterers’ option one or two safe port(s) United States Atlantic coast and/or

Charterers’ option one or two safe port(s) United States Gulf and/or

Charterers’ option one or two safe port(s) Caribbean …

Always maximum three ports total load and discharge.

Disports on trans-atlantic option always to be in Geographical rotation.”

1.9 This is a complex provision which requires to be read carefully. In the first place it identifies three alternative ranges by the use of the disjunctive “or”, which, for convenience, may be identified as the UK, European Mediterranean and Trans-Atlantic ranges. With regard to the first two, the charterers may nominate one or two safe ports within the designated ranges. The third is more extensive because each element is connected by the words “and/or” making it clear that the charterers may nominate ports located on the US Atlantic coast, US Gulf and Caribbean. The owners are protected by the limitation imposed on the charterers that a maximum of three ports may be nominated for loading and discharging, and where disports are nominated within the Transatlantic range they must be nominated in geographical rotation.

Exercising the right of nomination

1.10 The charterer is obliged to nominate a load/discharge port, providing the obligation has crystallized.¹⁰ The obligation is frequently express, but, if not, it is implied.¹¹ The implication is readily justifiable, for without it the owners are unable to perform their obligations under the charterparty; the nomination serves to complete the contract. The nomination must be of a port within the named or geographical range specified in the charterparty,¹² and must also satisfy any other criteria that may be set out, such as the requirement that only a “main” port can be nominated.¹³

1.11 The obligation to nominate may be subject to a condition precedent, for example a specified act on the part of the owners,¹⁴ and although a nomination is mostly made on the initiative of the charterers, by express agreement an obligation may be imposed on the master to seek out the nomination.¹⁵ The manner in which the nomination is exercised can have a material impact on the voyage which the vessel actually performs and to meet this contingency there is frequently an express term which provides for an adjustment of the freight rate in specified circumstances.¹⁶ The contract may also provide for what is to be done if a valid nomination is adversely affected by subsequent events and so impose a further obligation upon the charterer.¹⁷

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